Although the Indiana Deceptive Franchise Practices Act prohibits franchisors from "discriminating unfairly among its franchisees" in relation to the franchise agreement, an appeals court did not find that in a case where the franchisee claimed its franchisor gave other dealerships more favorable pricing.

The lawsuit, Andy Mohr Truck Center, Inc. v. Volvo Trucks North America, evolves around the 2010 dealership agreement governing the business relationship between the parties, which Seventh Circuit Chief Judge Wood said became soured quickly, both suing one another in federal court. Eventually, the litigation resulted in a $6.5 million jury verdict in favor of franchisee entity Andy Mohr Truck Center, and prevailed on Volvo's claim that it breached a commitment to build a new facility. However, Volvo did manage to stave off Mohr's claim against it based on Volvo's failure to award Mohr a Mack Truck franchise.

Greensfelder legal blog reported on the case this month, stating that the appeals court decision on a state franchise law discrimination claim "demonstrates once again the difficulty that franchisees face in such challenges, even when the court finds that the franchisor treated some franchisees differently than others in some instances and could not explain why." In addressing what it means to discriminate unfairly under the Indiana Deceptive Franchise Practices Act, the Seventh Circuit described in its ruling under what circumstances a franchisee could show unfair discrimination. It explained "the franchisee might be able to show that it never received better discounts than allegedly favored franchisees. Or, a franchisee could show that a franchisor violated the franchise agreement, offered the franchisee worse agreement terms than other franchisees, or discriminated against it by offering less favorable terms for the same purchase by the customer."

The legal report explains that in this case, "the evidence showed only that sometimes the franchisee received the better discount and sometimes the competitor did, such that the franchisee benefitted from the alleged discrimination." It further states that more is needed to show "unfair" discrimination, according to the court.

"As courts in other states have found in analyzing similar franchisee discrimination statutes, mere variations in dealings between franchisors and franchisees do not necessarily show discrimination that rises to the level of a legal violation," Greensfelder blog states. It concludes, "However, this case demonstrates the complexity and expense of defending these claims. Franchisors implementing discretionary sales assistance or other similar programs should carefully review the applicable state statutes, with the assistance of legal counsel, to evaluate their risks."

About Janet Sparks

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Janet Sparks is the former publisher of the Continental Franchise Review, an industry newsletter that covered the franchise community for over 30 years. She has also been a columnist for a leading franchise magazine for the past 13 years. Today she is an independent journalist who engages in investigative reporting, tackling complex issues that impact the franchise industry.